Time Charter Equivalent (TCE)
A good voyage estimation form will provide the estimator with cues to calculate the time charter equivalent, and cues to increase freight rates in case the voyage does not generate enough revenue. Most forms do have a cue which provides for the estimated increase in daily gross revenue for an estimated increase in the freight rate (say for every 10 cents of increase in freight).
The time charter equivalent allows the estimator to compare the voyage charter employment prospect with time charter employment options that may be available at the same time.
A good voyage estimation form provides for the time charter (TC) equivalent to be calculated. The calculation method of the TC equivalent is explained below.
To calculate the TC equivalent one must calculate the gross daily revenue (note that voyage costs are to the charterer’s account in a time charter). Calculation of the gross daily revenue is done as follows:
- Calculate the gross freight rate, then deduct the brokerage commission to get the nett freight rate.
- Deduct voyage costs from the gross freight rate to get the gross voyage surplus (as voyage costs are to the charterer’s account in a time charter).
- Divide the gross voyage surplus by the voyage duration to get the gross revenue generated daily.
From the gross revenue generated daily one can calculate the TC equivalent. To calculate the TC equivalent one must divide the gross daily revenue by one minus the brokerage commission; for e.g. say the gross daily revenue is $2000/- and the brokerage is 5%, the TC equivalent will be 2000 divided by 0 .95, which is $2105.26/-.
From the TC equivalent one can calculate the hire on the basis of summer deadweight per ton.
This is done by multiplying the TC equivalent by 30.4375 days (the average number of days per calendar month, including the extra day of the leap year) and dividing this figure by the vessel’s summer deadweight.
Tanker CalculationsTanker calculations are similar, but the estimator must note the following voyage estimations for a tanker voyage charter:
- Freight rates are quoted with reference to market levels associated with the World-wide Tanker Nominal Freight Scale (Worldscale).
- There is normally no despatch related to loading and discharging for tankers.
- Laytime for tankers is as per the ‘Worldscale’ and is 72 hours in total for both loading and discharging.
Reefer CalculationsThese are similar to dry cargo trades. Backhauling is sometimes used in trades where contractual obligations are not tight. Reefers do take liner cargoes to increase revenue on the ballast leg.